Team P21

Case No. 13-628

IN THE

Supreme Court of the United States OCTOBER TERM, 2013

_________________

IN RE FOODSTAR, INC.,

Debtor

FOODSTAR, INC.,

Petitioner,

v.

RAVI VOHRA,

Respondent.

_________________________________

On Writ of Certiorari to the

United States Court of Appeals

for the Thirteenth Circuit

__________________________________

BRIEF FOR PETITIONER

Team P21

Counsel for Petitioner

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i

QUESTIONS PRESENTED

1. Under 11 U.S.C. § 365, does a trademark licensee lose his rights to use the trademark

when the licensor has rejected the license based on sound business judgment and when

the statute’s language and legislative history support termination of the licensee’s

trademark rights?

2. Is the presumption against extraterritoriality overcome when the Code’s text and

legislative history—as well as public policy—support worldwide application of the Code

in its entirety?

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CERTIFICATE OF INTERESTED PARTIES

Pursuant to Rule 24(1)(b) of the Rules of the Supreme Court of the United States, the

caption of this case contains the names of all parties involved in the proceeding under review.

TEAM P21

COUNSEL FOR PETITIONER

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TABLE OF CONTENTS

QUESTIONS PRESENTED ............................................................................................................ i

CERTIFICATE OF INTERESTED PARTIES .............................................................................. ii

TABLE OF CONTENTS ............................................................................................................... iii

TABLE OF AUTHORITIES ......................................................................................................... vi

OPINIONS BELOW ..................................................................................................................... xii

STATEMENT OF JURISDICTION............................................................................................. xii

RELEVANT STATUTORY PROVISIONS ................................................................................ xii

STATEMENT OF THE CASE ....................................................................................................... 1

SUMMARY OF THE ARGUMENT ............................................................................................. 3

STANDARD OF REVIEW ............................................................................................................ 4

ARGUMENT .................................................................................................................................. 5

I. Foodstar’s rejection of the Burger Bites trademark licensing agreement

necessarily terminates Vohra’s right to use the trademark. ................................................ 5

A. The plain language of § 365 reflects Congress’s intent that trademark licenses

terminate upon rejection by the debtor-in-possession. ................................................. 8

1. The language of §§ 365(n) and 101(35A) strongly indicate that the special

protections of § 365(n) do not extend to trademark licenses. ............................... 11

2. Because the plain language of § 365(n) expressly excludes trademarks,

there is no need to resort to the statute’s legislative history. ................................ 12

3. Congress deliberately excluded trademark licenses from the special

protections of § 365(n). ......................................................................................... 12

4. Affording trademarks the special protections of § 365(n) curiously ignores

the distinctive nature of trademarks and undercuts the fundamental

purpose of § 365(n). .............................................................................................. 14

B. The Seventh Circuit erred by substituting its own unprecedented views of

trademark license protection over those prescribed by Congress. .............................. 15

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TABLE OF CONTENTS (cont’d)

C. Under Lubrizol, Foodstar should be allowed to reject its Burger Bites

trademark licensing agreement with Vohra—holding otherwise would gravely

undercut the purpose of bankruptcy reorganization. ................................................... 17

II. The presumption against extraterritoriality does not prevent the application of

§ 365 to the Vohra trademark licensing agreement because significant authority

demonstrates international application of the Code in full. .............................................. 19

A. The presumption against extraterritoriality applies in all cases; thus, the Code

is subject to the presumption....................................................................................... 20

B. The Code’s integrated scheme strongly illustrates congressional intent to

apply the Code internationally. ................................................................................... 20

1. Congress’s broad definition of property of the estate in § 541 includes

property located both inside and outside the territorial boundaries of the

United States. ........................................................................................................ 21

2. The legislative history of § 541 provides striking support for its

extraterritorial application. .................................................................................... 23

3. Congress intended for the automatic stay to apply extraterritorially, as

evidenced by the broad statutory language of §§ 541 and 1334(e)(1). ................. 25

4. In light of the purpose of § 365 and Chapter 11 reorganizations, the

language of §§ 541 and 1334(e)(1) necessitate the extraterritorial

application of § 365. ............................................................................................. 26

5. Other provisions of the Code affirm the notion that Congress intended for

the Code to have extraterritorial effect. ................................................................ 28

C. Because the Vohra licensing agreement falls within the Court’s constructive

possession, the application of § 365 is not extraterritorial. ......................................... 29

D. Eastlandian law should not apply in this case; rather, the Code should control

due to considerations of comity. ................................................................................. 30

CONCLUSION ............................................................................................................................. 33

APPENDIX A .................................................................................................................................. I

APPENDIX B ................................................................................................................................. II

APPENDIX C .............................................................................................................................. VII

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TABLE OF CONTENTS (cont’d)

APPENDIX D ............................................................................................................................ VIII

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TABLE OF AUTHORITIES

United States Supreme Court Cases

Andrus v. Glover Constr. Co.,

446 U.S. 608 (1980) .......................................................................................................... 13

Astoria Fed. Sav. & Loan Ass’n v. Solimino,

501 U.S. 104 (1991) .......................................................................................................... 16

Barnhart v. Sigmon Coal Co., Inc.,

534 U.S. 438 (2002) .................................................................................................... 12, 24

Celotex Corp. v. Edwards,

514 U.S. 300 (1995) .................................................................................................... 24, 30

Dewsnup v. Timm,

502 U.S. 410 (1992) .................................................................................................... 11, 24

EEOC v. Arabian Am. Oil Co.,

499 U.S. 244 (1991) .................................................................................. 19, 21, 22, 23, 28

Foley Bros., Inc. v. Filardo,

336 U.S. 281 (1949) .......................................................................................................... 19

Hartford Fire Ins. Co. v. California,

509 U.S. 764 (1993) .................................................................................................... 30, 31

Hilton v. Guyot,

159 U.S. 113 (1895) .................................................................................................... 31, 33

Katchen v. Landy,

382 U.S. 323 (1966) .................................................................................................... 22, 29

Kiobel v. Royal Dutch Petroleum Co.,

133 S. Ct. 1659 (2013) .......................................................................................... 20, 22, 26

Morrison v. Nat’l Austl. Bank Ltd.,

130 S. Ct. 2869 (2010) ................................................................................................ 19, 20

NLRB v. Bildisco & Bildisco,

465 U.S. 513 (1984) .............................................................................. 5, 12, 13, 15, 26, 32

Qualitex Co. v. Jacobson Prods. Co.,

514 U.S. 159 (1995) .......................................................................................................... 14

RadLAX Gateway Hotel, LLC v. Amalgamated Bank,

132 S. Ct. 2065 (2012) ...................................................................................................... 12

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TABLE OF AUTHORITIES (cont’d)

Sale v. Haitian Ctrs. Council, Inc.,

509 U.S. 155 (1993) .......................................................................................................... 19

Smith v. United States,

507 U.S. 197 (1993) .......................................................................................................... 19

Société Nationale Industrielle Aérospatiale v. United States Dist. Court for Southern

Dist. of Iowa, 482 U.S. 522 (1987) ................................................................................... 31

Sony Corp. of Am. v. Universal City Studios, Inc.,

464 U.S. 417 (1984) .......................................................................................................... 14

Toibb v. Radloff,

501 U.S. 157 (1991) .......................................................................................................... 12

Two Pesos, Inc. v. Taco Cabana, Inc.,

505 U.S. 763 (1992) .......................................................................................................... 14

Circuit Court Cases

Barcamerica Int’l USA Trust v. Tyfield Imps., Inc.,

289 F.3d 589 (9th Cir. 2002) ...................................................................................... 15, 27

C-TC 9th Ave. P’ship v. Norton Co. (In re C-TC 9th Ave. P’ship),

113 F.3d 1304 (2d Cir. 1997)............................................................................................ 18

Dawn Donut Co. v. Hart’s Food Stores, Inc.,

267 F.2d 358 (2d Cir. 1959).............................................................................................. 14

French v. Liebmann (In re French),

440 F.3d 145 (4th Cir. 2006) ...................................................................................... 21, 32

Grady v. A.H. Robins Co.,

839 F.2d 198 (7th Cir. 2011) ............................................................................................ 21

Green Tree Servicing, LLC v. Coleman (In re Coleman),

392 B.R. 767 (B.A.P. 8th Cir. 2008)................................................................................. 11

Grella v. Salem Five Cent Sav. Bank,

42 F.3d 26 (1st Cir. 1994) ................................................................................................... 4

Hong Kong & Shanghai Banking Corp., Ltd. v. Simon (In re Simon),

153 F.3d 991 (9th Cir. 1998) ..................................................................................... passim

In re Exide Techs.,

607 F.3d 957 (3d Cir. 2010).......................................................................................... 6, 12

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TABLE OF AUTHORITIES (cont’d)

In re XMH,

647 F.3d 690 (7th Cir. 2011) ...................................................................................... 14, 15

Jaffé v. Samsung Elecs. Co., Ltd.,

No. 12-1802 (4th Cir. Dec. 3, 2013) ................................................................................. 32

Kollias v. D & G Marine Maint.,

29 F.3d 67 (2d Cir. 1994)............................................................................................ 19, 20

Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc.,

756 F.2d 1043 (4th Cir. 1985) ................................................................................... passim

NMSBPCSLDHB, L.P. v. Integrated Telecom Express, Inc. (In re Integrated Telecom

Express, Inc.), 384 F.3d 108 (3d Cir. 2004) ..................................................................... 26

Precision Indus., Inc. v. Qualitech Steel SBQ, LLC,

327 F.3d 537 (7th Cir. 2003) .......................................................................................... 8, 9

River Rd. Hotel Partners, LLC v. Amalgamated Bank,

651 F.3d 642 (7th Cir. 2011) .............................................................................................. 4

Sunbeam Prods., Inc. v. Chi. Am. Mfg., LLC,

686 F.3d 372 (7th Cir. 2012) ........................................................................ 6, 7, 12, 15, 16

Underwood v. Hilliard (In re Rimsat, Ltd.),

98 F.3d 956 (7th Cir. 1996) .................................................................................. 21, 29, 30

District Court Cases

In re New York Investors Mut. Grp., Inc.,

143 F. Supp. 51 (S.D.N.Y. 1956) ....................................................................................... 9

Bankruptcy Court Cases

Groupe v. Hill (In re Hill),

156 B.R. 998 (Bankr. N.D. Ill. 1993) ............................................................................... 21

In re Axona Int’l Credit & Commerce Ltd.,

88 B.R. 597 (Bankr. S.D.N.Y. 1998) ................................................................................ 28

In re Chipwich, Inc.,

54 B.R. 427 (Bankr. S.D.N.Y. 1985) .......................................................................... 11, 13

In re Gold & Honey, Ltd.,

410 B.R. 357 (Bankr. E.D.N.Y. 2009) .............................................................................. 31

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ix

TABLE OF AUTHORITIES (cont’d)

In re Henderson,

245 B.R. 449 (Bankr. S.D.N.Y. 2000) ................................................................................ 5

In re HQ Global Holdings,

290 B.R. 507 (Bankr. D. Del. 2003) ................................................................................. 13

In re Nat’l Safe Ctr., Inc.,

41 B.R. 195 (Bankr. D. Haw. 1984) ................................................................................. 25

In re Old Carco LLC,

406 B.R. 180 (Bankr. S.D.N.Y. 2009) .............................................................................. 13

In re Qimonda AG,

462 B.R. 165 (Bankr. E.D. Va. 2011) ............................................................................... 32

In re Taylor,

198 B.R. 142 (Bankr. D.S.C. 1996) .................................................................................... 9

Maxwell Commc’n Corp. plc v. Barclays Bank (In re Maxwell Commc’n Corp. plc),

170 B.R. 800 (Bankr. S.D.N.Y. 1994) ........................................................................ 20, 29

Nakash v. Zur (In re Nakash),

190 B.R. 763 (Bankr. S.D.N.Y. 1996) .............................................................................. 25

Raima UK Ltd. v. Centura Software Corp. (In re Centura Software Corp.),

281 B.R. 660 (Bankr. N.D. Cal. 2002) ................................................................... 8, 11, 12

Thurmond v. Rajapakse (In re Rajapakse),

346 B.R. 233 (Bankr. N.D. Ga. 2005) .................................................................. 23, 24, 25

Sombrero Reef Club, Inc. v. Allman (In re Sombrero Reef Club, Inc.),

18 B.R. 612 (Bankr. S.D. Fla. 1982)................................................................................. 10

Statutes

11 U.S.C. § 70 (repealed 1978)............................................................................................... 23, 24

11 U.S.C. § 101 ........................................................................................................... 11, 12, 13, 33

11 U.S.C. § 109 ............................................................................................................................. 29

11 U.S.C. § 304 (repealed 2005)................................................................................................... 28

11 U.S.C. § 362 ....................................................................................................................... 25, 31

11 U.S.C. § 365 ...................................................................................................................... passim

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TABLE OF AUTHORITIES (cont’d)

11 U.S.C. § 541 ...................................................................................................................... passim

11 U.S.C. § 1107 ............................................................................................................................. 5

11 U.S.C. § 1113 ........................................................................................................................... 13

11 U.S.C. § 1506 ........................................................................................................................... 32

18 U.S.C. § 953 ............................................................................................................................. 23

28 U.S.C. § 1334 .................................................................................................................... passim

Legislative History

H.R. REP. NO. 82-2320 (1952), reprinted in 1952 U.S.C.C.A.N. 1960 ........................................ 24

H.R. REP. NO. 95-595 (1977), reprinted in 1978 U.S.C.C.A.N. 5963 ................................ 6, 24, 26

H.R. REP. NO. 109-31 (2005), reprinted in 2005 U.S.C.C.A.N. 88 .............................................. 28

S. REP. NO. 100-505 (1988), reprinted in 1988 U.S.C.C.A.N. 3200 ..................................... passim

Secondary Sources

Collier on Bankruptcy (14th ed. 1978) ......................................................................................... 24

Daniel A. Nolan, Comment, A “Fundamental” Problem: The Vulnerability of Intellectual

Property Licenses in Chapter 15 and the Meaning of § 1506, 28 EMORY BANKR.

DEV. J. 177 (2011) ...................................................................................................... 31, 32

David M. Green & Walter Benzija, Spanning the Globe: The Intended Extraterritorial

Reach of the Bankruptcy Code, 10 AM. BANKR. INST. L. REV. 85 (2002) ............ 22, 28, 29

DOUGLAS G. BAIRD, Elements of Bankruptcy (5th ed. 2010) ....................................................... 12

Evelyn H. Biery, Jason L. Boland, & John D. Cornwell, A Look at Transnational

Insolvencies and Chapter 15 of the Bankruptcy Abuse Prevention and Consumer

Protection Act of 2005, 47 B.C. L. REV. 23 (2005) .......................................................... 28

James M. Wilton & Andrew G. Devore, Trademark Licensing in the Shadow of

Bankruptcy, 68 BUS. LAW. 739 (2013) .................................................... 6, 8, 13, 14, 15, 16

John Thomas Ellwood, The Effects of the Sunbeam Decision on the Rejection of

Trademark Licenses in Bankruptcy, Seton Hall Law eRepository, Student

Scholarship, Paper 213 (2013) .......................................................................................... 16

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TABLE OF AUTHORITIES (cont’d)

Michael T. Andrew, Executory Contracts in Bankruptcy: Understanding Rejection,

59 U. COLO. L. REV. 845 (1988) ................................................................................... 9, 10

Peter M. Gilhuly, Kimberly A. Posin, Ted A. Dillman, Intellectually Bankrupt?: The

Comprehensive Guide to Navigating IP Issues in Chapter 11,

21 AM. BANKR. INST. L. REV. 1 (2013) ....................................................................... 26, 27

Raymond T. Nimmer, Executory Contracts in Bankruptcy: Protecting the Fundamental

Terms of the Bargain, 54 U. COLO. L. REV. 507 (1983) ............................................. 26, 27

Richard Lieb, The Interrelationship of Trademark Law and Bankruptcy Law,

64 AM. BANKR. L.J. 1 (1990) ...................................................................................... 27, 30

Suzanne Harrison, The Extraterritoriality of the Bankruptcy Code: Will the Borders

Contain the Code?, 12 BANKR. DEV. J. 809 (1996) ............................ 19, 20, 21, 25, 27, 29

T. Brandon Welch, The Territorial Avoidance Power of the Bankruptcy Code, 24 EMORY

BANKR. DEV. J. 553 (2008) ............................................................................................... 30

Vern Countryman, Executory Contracts in Bankruptcy: Part I,

57 MINN. L. REV. 439 (1973) .............................................................................................. 5

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OPINIONS BELOW

The decisions and orders of the United States Bankruptcy Court for the District of Moot

and of the district court are unreported and therefore unavailable. The decision of the United

States Court of Appeals for the Thirteenth Circuit is also unreported. The opinion, dated October

14, 2013, is set forth in Case No. 13-4080 and is incorporated in the record on appeal (hereinafter

“R.”).

STATEMENT OF JURISDICTION

The formal statement of jurisdiction is waived pursuant to Competition Rule VIII.

RELEVANT STATUTORY PROVISIONS

The following federal statutes are relevant to the determination of the present case and

are reproduced in the Appendices:

11 U.S.C. § 101(35A)

11 U.S.C. § 365

11 U.S.C. § 541(a)

28 U.S.C. § 1334(e)(1)

Team P21

Case No. 13-628

IN THE

Supreme Court of the United States OCTOBER TERM, 2013

_________________

IN RE FOODSTAR, INC.,

Debtor

FOODSTAR, INC.,

Petitioner,

v.

RAVI VOHRA,

Respondent.

_________________

On Writ of Certiorari to the

United States Court of Appeals

for the Thirteenth Circuit

BRIEF FOR PETITIONER

TO THE HONORABLE SUPREME COURT OF THE UNITED STATES:

Petitioner, FOODSTAR, INC., appellee before the United States Court of Appeals for the

Thirteenth Circuit, respectfully submits this brief on the merits and asks this Court to reverse the

judgment of the court of appeals.

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1

STATEMENT OF THE CASE

Statement of the Facts. Foodstar, Inc., headquartered in the State of Moot, is the

franchisor of the popular gourmet hamburger fast food restaurant chain, Burger Bites. (R. at 3.)

Unlike most in the fast food industry, Foodstar concentrates its brand on miniature burgers

instead of large ones. (R. at 3.) Originally, a citizen of Eastlandia developed the concept for

miniaturized burgers and established the first Burger Bites restaurant. (R. at 4.) In fact, Foodstar

acquired the worldwide rights to the Burger Bites trademark from the developer himself, along

with all of his rights under an existing licensing agreement with another Eastlandian

citizen—Ravi Vohra. (R. at 4–5.) Vohra’s licensing agreement granted him a 20-year exclusive

license to use the Burger Bites trademark in Eastlandia. (R. at 4.) In addition, like most United

States trademark licenses, the agreement gave the licensor control over many aspects of Vohra’s

operations, including quality. (R. at 4.)

After Foodstar acquired the Burger Bites trademark rights, it worked to develop and

expand the franchise throughout the United States and other nations, but not in Eastlandia where

Vohra had already established thirty-two Burger Bites restaurants. (R. at 5.) Indeed, in an effort

to continue its miniature trend and increase revenues before the initial public offering of its

stock, Foodstar acquired a miniature cupcake chain and attempted to merge the miniature

cupcake and hamburger product lines into combined franchised stores. (R. at 3.)

Unfortunately, miniature cupcakes were not as popular as Foodstar originally thought,

and the company had to abandon its idea of combined franchised stores. (R. at 3.) Worse yet,

the dismal failure of the miniature cupcake venture left Foodstar deep in debt and without

enough operating capital to run its burger franchise. (R. at 3.) Consequently, Foodstar filed for

bankruptcy under Chapter 11, and now plans to liquidate its primary asset—the Burger Bites

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trademark—along with an assignment to the trademark buyer of all of Foodstar’s franchise

agreements. (R. at 3–4.)

Nature of the Proceedings. In preparation for the sale of its worldwide Burger Bites

trademark, Foodstar filed a motion under 11 U.S.C. § 365 to reject Vohra’s licensing agreement.

(R. at 5.) In response, Vohra appeared in the bankruptcy case and filed an objection to

Foodstar’s motion, arguing that rejection was not in the best interest of the estate because it

would not terminate his right to use the Burger Bites trademark in Eastlandia; rather, rejection

would merely deprive the estate of the benefits of the license. (R. at 5.) Further, Vohra argued

that the rejection powers of § 365 did not apply extraterritorially. (R. at 5.)

Subsequently, the bankruptcy court held a hearing on Foodstar’s motion to reject Vohra’s

license agreement, at which the parties filed a joint stipulation that (1) the Vohra licensing

agreement was an executory contract, and (2) the worldwide Burger Bites trademark would sell

for 10 to 15 percent less if it was subject to Vohra’s license. (R. at 5.) In reliance on the parties’

stipulations, the bankruptcy court entered an order authorizing rejection of the Vohra license

because rejection was in the best interest of the estate. (R. at 5.)

Vohra immediately appealed the bankruptcy court’s order to the district court;

meanwhile, he sent Foodstar several letters indicating that he intended to continue using the

Burger Bites trademark, regardless of Foodstar’s rejection. (R. at 6.) As a result, Foodstar filed

an adversary proceeding in the bankruptcy court against Vohra. (R. at 6.) Foodstar filed a

motion for summary judgment, sought a declaration that its rejection terminated Vohra’s rights

to use the Burger Bites trademark, and requested an injunction prohibiting Vohra from further

use of the trademark. (R. at 6.) The bankruptcy court then entered a second order, affirming the

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termination of Vohra’s trademark rights and enjoining him from using the trademark. (R. at 6.)

Upon Vohra’s appeal, the bankruptcy court stayed its injunction. (R. at 6.)

The district court combined the appeals and affirmed both orders, and the Thirteenth

Circuit reversed, holding (1) that Vohra could continue to use the Burger Bites trademark in

Eastlandia after Foodstar’s rejection of the licensing agreement in bankruptcy, and (2) that the

presumption against extraterritoriality blocked application of 11 U.S.C. § 365 abroad, regardless

of its potential contract-avoiding power. (R. at 6–7, 10.) This appeal followed. (R. at 1.)

SUMMARY OF THE ARGUMENT

The Thirteenth Circuit improperly reversed the district court on both points. First, when

Foodstar terminated the Vohra licensing agreement, Vohra lost his right to use the Burger Bites

trademark going forward. Under 11 U.S.C. § 365(n), Congress enacted special protections for

licensees of certain types of intellectual property, such that those licensees could retain their

rights to use the intellectual property after the licensor’s rejection in bankruptcy. But Congress

excluded trademark licenses from the protections of § 365(n). Contrary to the types of

intellectual property protected under § 365(n), trademarks require continuous quality control, a

burden that would undermine the Code’s efforts under Chapter 11 to give the debtor-in-

possession flexibility and breathing space. Here, Foodstar exercised sound business judgment

when it rejected Vohra’s licensing agreement. The Burger Bites trademark is Foodstar’s primary

source of funds by which it might emerge from bankruptcy. Further, it is undisputed that the

trademark will sell for 10 to 15 percent less if it is subject to Vohra’s licensing agreement than if

his rights terminate. Thus, rejection is in the best interest of the estate, and the necessary result

in this case is Vohra’s preclusion from further use of the Burger Bites trademark.

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Additionally, irrespective of the fact that the Vohra licensing agreement is a foreign

agreement, § 365 applies for two reasons. First, this Court should evaluate the Code as a whole

to determine Congress’s extraterritorial intent. Congress broadly defined property of the estate

in § 541 to include property wherever located—inside and outside the territorial boundaries of

the United States—thus enabling the courts to safeguard a debtor’s estate regardless of its

location. Even though § 365 does not contain any specific language or legislative history that

indicates an extraterritorial application, the rejection powers of § 365 are integral to the debtor’s

ability to restructure its business, and thus, it is essential that courts have the ability to grant

rejection of foreign licensing agreements like Vohra’s. Second, even if this Court finds that

§ 365 does not apply extraterritorially, this Court can nevertheless apply § 365 to the Vohra

licensing agreement. Because trademarks and trademark licensing agreements fall within this

Court’s jurisdiction under §§ 541 and 1334(e)(1), this Court has constructive possession and

control over Vohra’s agreement. Therefore, this Court can reject Vohra’s licensing agreement

under § 365 without applying the statute extraterritorially.

Accordingly, this Court should reverse the decision of the Thirteenth Circuit Court of

Appeals and hold that § 365 permits the termination of a licensee’s trademark rights upon

rejection and that § 365 applies to the Vohra license agreement even though it is a foreign

agreement.

STANDARD OF REVIEW

This Court reviews a bankruptcy court’s conclusions of law and interpretations of the

Code de novo and its findings of fact for clear error. See River Rd. Hotel Partners, LLC v.

Amalgamated Bank, 651 F.3d 642, 647 (7th Cir. 2011); Grella v. Salem Five Cent Sav. Bank, 42

F.3d 26, 30 (1st Cir. 1994).

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ARGUMENT

I. Foodstar’s rejection of the Burger Bites trademark licensing agreement necessarily

terminates Vohra’s right to use the trademark.

Section 365(a) of the Bankruptcy Code allows a trustee,1 “subject to the court’s

approval,” to “assume or reject any executory contract . . . of the debtor.” 11 U.S.C. § 365(a).

Although the Code does not expressly define “executory contract,” this Court has found that a

contract is executory if “performance is due to some extent on both sides.”2 NLRB v. Bildisco &

Bildisco, 465 U.S. 513, 522 n.6 (1984). Further, the Code does not explain the consequences of

rejection; rather, § 365(g) states only that “the rejection of an executory contract . . . constitutes a

breach of such contract.” 11 U.S.C. § 365(g). Here, the parties have stipulated that the Vohra

trademark license was an executory contract. (R. at 5.) Thus, the remaining question before the

Court is: What is the legal effect of rejection?

“The effect of rejection is one of the great mysteries of bankruptcy law.” In re

Henderson, 245 B.R. 449, 453 (Bankr. S.D.N.Y. 2000). Indeed, there is a circuit split on this

issue. The Fourth Circuit has held that an intellectual property licensee is “entitled to treat

rejection as a breach and seek a money damages remedy,” but it cannot “seek to retain its

contract rights in the technology by specific performance even if that remedy would ordinarily be

available upon breach of this type of contract.” Lubrizol Enters., Inc. v. Richmond Metal

Finishers, Inc., 756 F.2d 1043, 1048 (4th Cir. 1985). The Seventh Circuit, however, has held

that rejection of a trademark license does not terminate the licensee’s contractual rights to use the

1 There is no trustee in this case; however, Foodstar, acting as a debtor-in-possession, can itself assume or reject

contracts. See 11 U.S.C. § 1107(a).

2 Professor Vern Countryman created and supported a more specific definition of executory contract as “a contract

under which the obligation of both the bankrupt and the other party to the contract are so far unperformed that the

failure of either to complete performance would constitute a material breach excusing the performance of the other.”

Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 MINN. L. REV. 439, 460 (1973).

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licensed trademark.3 See Sunbeam Prods., Inc. v. Chi. Am. Mfg., LLC, 686 F.3d 372, 377–78

(7th Cir. 2012).

In Lubrizol, the Fourth Circuit had to determine whether an intellectual property licensee

retained its ability to use a debtor’s intellectual property after the debtor rejected the license in

bankruptcy. See Lubrizol, 756 F.2d at 1048. Richmond Metal Finishers (RMF) granted Lubrizol

Enterprises a nonexclusive license to utilize RMF’s patented metal coating process technology.

See id. at 1045. The next year, RMF filed for bankruptcy protection under Chapter 11 of the

Code and sought to reject the Lubrizol license under § 365(a). See id. The Fourth Circuit upheld

the bankruptcy court’s rejection of the license and held that RMF could “deprive Lubrizol of all

rights to the process.” Id. at 1048. Noting that “the legislative history of § 365(g) makes clear

that the purpose of the provision is to provide only a damages remedy for the non-bankrupt

party,” the court held that Lubrizol could treat RMF’s rejection as a breach and seek money

damages, but it “could not seek to retain its contract rights in the technology by specific

performance.” Id. (citing H.R. REP. NO. 95-595, at 349 (1977), reprinted in 1978 U.S.C.C.A.N.

5963, 6305).

Further, the court noted that “Congress had afforded remedies equivalent to specific

performance for lessees of real property and special treatment to union members under collective

bargaining agreements” in other sections of the Code, but it had not provided comparable

treatment for intellectual property licensees. James M. Wilton & Andrew G. Devore, Trademark

Licensing in the Shadow of Bankruptcy, 68 BUS. LAW. 739, 743 (2013) (citing Lubrizol, 756 F.2d

3 The Third Circuit has faced a factually similar case, but the majority avoided deciding the issue at bar by holding

that the parties’ agreement was not an executory contract. See In re Exide Techs., 607 F.3d 957, 965 (3d Cir. 2010).

In a concurring opinion, Judge Ambro reasoned that courts should not use § 365 to let a licensor reclaim trademark

rights it previously bargained away. See id. at 967 (Ambro, J., concurring).

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at 1048). Therefore, in the Fourth Circuit, an intellectual property licensee loses its ability to use

the debtor’s intellectual property upon rejection of the license. See Lubrizol, 756 F.2d at 1048.

In Sunbeam, however, the Seventh Circuit departed from Lubrizol’s interpretation of

§ 365(g). See Sunbeam, 686 F.3d at 376–78. In that case, Lakewood Engineering &

Manufacturing Co. authorized Chicago American Manufacturing (CAM) to practice Lakewood’s

patents and use its trademarks on box fans. See id. at 374. Shortly thereafter, Lakewood’s

creditors filed an involuntary bankruptcy proceeding against it, and the court-appointed trustee

sold Lakewood’s patents and trademarks to Sunbeam. See id. Because Sunbeam did not want

CAM to sell the Lakewood-branded fans in competition with Sunbeam products, the “trustee

rejected the executory portion of the CAM contract under 11 U.S.C. § 365(a).” Id.

The Seventh Circuit evaluated the effect of the trustee’s rejection and whether Lubrizol’s

understanding of § 365(g) was correct. See id. at 375–76. The court acknowledged that after

contract rejection, “a debtor is not subject to an order of specific performance”; however, it

found that “nothing about this process implies that any rights of the other contracting party have

been vaporized.” Id. at 377. The court then considered how rejection works for leases under

§ 365(h): “[A] lessor that enters bankruptcy could not, by rejecting the lease, end the tenant’s

right to possession and thus re-acquire premises that might be rented out for a higher price. The

bankrupt lessor might substitute damages for an obligation to make repairs, but not rescind the

lease altogether.” Id. Ultimately, the court held that “[w]hat § 365(g) does by classifying

rejection as [a] breach is establish that in bankruptcy as outside of it, the other party’s rights

remain in place.” Id. Therefore, in the Seventh Circuit, an intellectual property licensee retains

its ability to use the debtor’s trademarks after rejection of the license. See id.

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The Thirteenth Circuit, following Sunbeam, held that Vohra could continue using the

Burger Bites trademark in accordance with the licensing agreement after Foodstar’s rejection of

the license. (R. at 6–7.) For the reasons that follow, this Court should reverse the judgment of

the Thirteenth Circuit Court of Appeals and hold that rejection of a trademark license in

bankruptcy terminates the licensee’s ability to use the debtor’s trademark.

A. The plain language of § 365 reflects Congress’s intent that trademark licenses

terminate upon rejection by the debtor-in-possession.

Under § 365(g), rejection of an executory contract constitutes a breach of contract

“immediately before the date of the filing of the petition.” 11 U.S.C. § 365(g). The non-debtor

counter-party’s remedy is to file a claim under § 365(g) for damages, which courts treat as

unsecured prepetition claims. See Raima UK Ltd. v. Centura Software Corp. (In re Centura

Software Corp.), 281 B.R. 660, 668–69 (Bankr. N.D. Cal. 2002). In Lubrizol, the Fourth Circuit

found that § 365(g) provides only for a damages remedy. See Lubrizol, 756 F.2d at 1048. “The

Lubrizol court found support for its conclusion that, as a general rule, non-debtor parties to

executory contracts are not entitled to remedies of specific performance based on Bankruptcy

Code exceptions that prove the rule.” James M. Wilton & Andrew G. Devore, Trademark

Licensing in the Shadow of Bankruptcy, 68 BUS. LAW. 739, 750 (2013). Indeed, Congress has

enacted several exceptions to this general rule that preserve some of the non-debtor counter-

party’s rights to certain executory contracts, demonstrating its awareness of the “adverse

consequences for contracting parties” provided for by the rejection of such contracts. Lubrizol,

756 F.2d at 1048.

First, Congress has provided an exception for lessees of real property. See 11 U.S.C.

§ 365(h)(1). Section 365(h), upon rejection, allows a non-debtor lessee of an unexpired real

property lease to treat the lease as terminated or “to remain in possession of estate property

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notwithstanding the debtor-in-possession’s decision to reject the lease.” Precision Indus., Inc. v.

Qualitech Steel SBQ, LLC, 327 F.3d 537, 546 (7th Cir. 2003). Essentially, with the enactment of

§ 365(h), Congress sought to preserve the expectations of the debtor-lessor and the lessee by

“codifying the balance between the [parties’] competing interests,” and “to prevent forcible

evictions in all possible circumstances.” In re Taylor, 198 B.R. 142, 165–66 (Bankr. D.S.C.

1996).

Congress has also provided an exception for non-debtor purchasers of real property who

are already in possession. See 11 U.S.C. §§ 365(i), (j). In In re New York Investors Mutual

Group, Inc., the court addressed whether “a vendee under a contract for the purchase of real

property who has made a payment on account of the purchase price to the vendor, who before

delivery of the deed is declared a bankrupt, [has] the right to compel specific performance

against the vendor’s trustee.” 143 F. Supp. 51, 54 (S.D.N.Y. 1956). The court found that the

vendee’s rights were subject to the trustee’s right to reject executory contracts “so as to achieve

the overriding purpose of the bankruptcy law to secure an equitable distribution of the assets of

the bankrupt,” and that the vendee’s only remedy was a claim for damages for breach of contract.

Id. In response to In re New York Investors, Congress enacted §§ 365(i) and (j). See Michael T.

Andrew, Executory Contracts in Bankruptcy: Understanding Rejection, 59 U. COLO. L. REV.

845, 911–12 (1988). Under § 365(i), like § 365(h), a purchaser for the sale of real property may

remain in possession of such real property upon rejection. See 11 U.S.C. § 365(i). In addition,

under § 365(j), a purchaser that is not in possession may recover any portion paid on the

purchase price. See 11 U.S.C. § 365(j).

In 1984, Congress also provided an exception for owners of timeshare interests. See 11

U.S.C. § 365(h)(2); Michael T. Andrew, Executory Contracts in Bankruptcy: Understanding

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Rejection, 59 U. COLO. L. REV. 845, 911–12 (1988). In Sombrero Reef Club, Inc. v. Allman (In

re Sombrero Reef Club, Inc.), a resort-marina complex sought to reject approximately 200 valid

timeshare purchase contracts. See 18 B.R. 612, 614 (Bankr. S.D. Fla. 1982). Finding that the

timeshare interests did not fall within the ambit of §§ 365(h)(1) or (i), the court held that the

timeshare purchasers had no special protection under § 365. See id. at 619–20. In addition, the

court noted that rejection of the contract was a breach under § 365(g), and “the fact that the

action constitute[d] a breach [was] not grounds for denying rejection”; rather, the timeshare

purchasers were entitled to damages. Id. at 620. In response, Congress amended § 365 to

explicitly extend the protections of §§ 365(h)(1) and (i) to timeshare interests. See Michael T.

Andrew, Executory Contracts in Bankruptcy: Understanding Rejection, 59 U. COLO. L. REV.

845, 911–12 (1988). Thus, under § 365(h)(2), upon rejection, the purchaser of a timeshare

interest may now treat the timeshare plan as terminated or retain its rights in the interest. See 11

U.S.C. § 365(h)(2).

Lastly, and especially pertinent to this case, in response to Lubrizol, Congress enacted

§ 365(n) to clarify the rights of intellectual property licensees when a trustee or debtor-in-

possession rejects an intellectual property license in bankruptcy. See S. REP. NO. 100-505, at 2

(1988), reprinted in 1988 U.S.C.C.A.N. 3200, 3201. The statute, “provides for treatment of

intellectual property licenses under Section 365 in a manner that parallels generally the treatment

of real estate leases in the existing provisions of Section 365(h)(1).” S. REP. NO. 100-505, at 4,

reprinted in 1988 U.S.C.C.A.N. 3200, 3203. Accordingly, under § 365(n), a licensee of

intellectual property under a rejected executory contract can elect to retain its rights to use the

intellectual property for the duration of the contract. See 11 U.S.C. § 365(n). Nevertheless, there

are numerous indicators that Congress did not intend for § 365(n) to protect trademark licenses.

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1. The language of §§ 365(n) and 101(35A) strongly indicate that the special

protections of § 365(n) do not extend to trademark licenses.

When interpreting a statute, a court should always start with the plain language of the

statute itself. See Green Tree Servicing, LLC v. Coleman (In re Coleman), 392 B.R. 767, 770

(B.A.P. 8th Cir. 2008). Of great significance to this case is the fact that Congress defined

“intellectual property” to “mean[] (A) trade secret; (B) invention, process, design, or plant

protected under title 35; (C) patent application; (D) plant variety; (E) work of authorship

protected under title 17; or (F) mask work protected under chapter 9 of title 17.” 11 U.S.C.

§ 101(35A). Consequently, by definition, the plain language of § 365(n) excludes trademark

licenses. See Dewsnup v. Timm, 502 U.S. 410, 434 (1992) (Scalia, J., dissenting) (noting that

“the [statutory] text means precisely what it says”).

Consistent with the statutory language, the legislative history of § 365(n) states that

despite Congress’s concern with the rejection of trademarks because of the interpretation of

§ 365 by Lubrizol and other courts, “such contracts raise issues beyond the scope of this

legislation.” S. REP. NO. 100-505, at 5–6, reprinted in 1988 U.S.C.C.A.N. 3200, 3204 (citing In

re Chipwich, Inc., 54 B.R. 427 (Bankr. S.D.N.Y. 1985)). Indeed, Congress explicitly stated that

“the [statute] does not address rejection of executory trademark . . . licenses by debtor-licensors”

and that the definition of intellectual property includes virtually all types of intellectual property

rights other than trademarks. S. REP. NO. 100-505, at 7, reprinted in 1988 U.S.C.C.A.N. 3200,

3204. Therefore, Congress “expressly withheld § 365(n) protection from rejected executory

trademark licenses.” In re Centura Software Corp., 281 B.R. at 670.

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2. Because the plain language of § 365(n) expressly excludes trademarks, there is no

need to resort to the statute’s legislative history.

Although the legislative history of § 365(n) suggests “the possibility that Congress

intended an equitable treatment for rejected trademarks,” because the statutory language is clear,

“it is not necessary to delve into its legislative history.” Id.; see also Toibb v. Radloff, 501 U.S.

157, 162 (1991). This Court has “stated time and again that courts must presume that a

legislature says in a statute what it means and means in a statute what it says there. When the

words of a statute are unambiguous, then, this first canon is also the last: judicial inquiry is

complete.” Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 461–62 (2002) (internal citations

omitted). In addition, this Court has held that rights depend on what the Code provides, not on

notions of equity. See RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065,

2073 (2012). Accordingly, because the language of §§ 365(n) and 101(35A) are clear, there is

no need to resort to the statutes’ legislative history. See Toibb, 501 U.S. at 162.

3. Congress deliberately excluded trademark licenses from the special protections of

§ 365(n).

Contrary to the Seventh and Thirteenth Circuits’ opinions, an omission is not necessarily

just an omission. See Sunbeam, 686 F.3d at 375; (R. at 9.) “Under the maxim of statutory

interpretation of expressio unius, one infers from the inclusion of one thing the exclusion of

another.” DOUGLAS G. BAIRD, Elements of Bankruptcy 121 (5th ed. 2010). Consequently,

because § 365(n) does not specifically cover trademarks, courts may infer their exclusion from

the protections of § 365(n). See id. at 126. Indeed, this Court has “endorsed reasoning from

negative inference in the context of § 365.” In re Exide Techs., 607 F.3d at 966 (Ambro, J.,

concurring) (citing Bildisco, 465 U.S. at 522–23). As then Justice Rehnquist stated in Bildisco:

“Obviously, Congress knew how to draft an exclusion for collective bargaining agreements when

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it wanted to; its failure to do so in this instance indicates that Congress intended that [§] 365(a)

apply to all collective-bargaining agreements covered by the NLRA.” Bildisco, 465 U.S. at 522–

23; see also Andrus v. Glover Constr. Co., 446 U.S. 608, 616–17 (1980) (“Where Congress

explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to

be implied, in the absence of evidence of a contrary legislative intent.”). To be sure, Congress

did in fact enact § 1113 of the Code in response to this Court’s holding in Bildisco, which

permitted a debtor-in-possession to reject a collective-bargaining agreement. See James M.

Wilton & Andrew G. Devore, Trademark Licensing in the Shadow of Bankruptcy, 68 BUS. LAW.

739, 750 (2013). Thus, Congress has shown, on more than one occasion, its willingness to draft

an exclusion from the general rule of § 365.

After the enactment of § 365(n), most courts continued to follow Lubrizol as it pertains to

trademarks.4 Nevertheless, in the twenty-six years since Congress enacted § 365(n), it has not

amended either §§ 365(n) or 101(35A) to include trademarks. See 11 U.S.C. §§ 101(35A),

365(n). It only took Congress three years to add § 365(n) after Lubrizol. See S. REP. NO. 100-

505, at 1, reprinted in 1988 U.S.C.C.A.N. 3200, 3200. Accordingly, the fact that Congress has

not yet amended either section to include trademarks strongly indicates its desire to exclude

trademark licenses from the protections of § 365(n).

4 See, e.g., In re Old Carco LLC, 406 B.R. 180, 211 (Bankr. S.D.N.Y. 2009) (“Trademarks are not ‘intellectual

property’ under the Bankruptcy Code . . . [, so] rejection of licenses by [a] licensor deprives [the] licensee of [the]

right to use [a] trademark . . . .”); In re HQ Global Holdings, 290 B.R. 507, 513 (Bankr. D. Del. 2003) (“[S]ince the

Bankruptcy Code does not include trademarks in its protected class of intellectual property, Lubrizol controls and

the Franchisees’ right to use the trademark stops on rejection.”); In re Chipwich, 54 B.R. at 431 (“[B]y rejecting the

two [trademark] licenses[,] the debtor will deprive [the licensee] of its right to use the . . . trademark for its

products.”).

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4. Affording trademarks the special protections of § 365(n) curiously ignores the

distinctive nature of trademarks and undercuts the fundamental purpose of

§ 365(n).

Section 365(n) protects and facilitates the licensing of technology in order to advance

technological development and innovation. See S. REP. NO. 100-505, at 3, reprinted in 1988

U.S.C.C.A.N. 3200, 3202. While patents, copyrights, and trade secrets are “categories of

intellectual property related to innovation, technological development, and the expression of

ideas,” trademarks are not. James M. Wilton & Andrew G. Devore, Trademark Licensing in the

Shadow of Bankruptcy, 68 BUS. LAW. 739, 756 (2013). Certainly, this Court has consistently

acknowledged the fundamental differences between copyrights and patents as they compare to

trademarks. As well stated by this Court: “It is the province of patent law, not trademark law, to

encourage innovation . . . .” Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164 (1995).

Moreover, this Court has consistently rejected the suggestion that a similarity “exists between

copyright law and trademark law, and in the process of doing so [has] recognized the basic

similarity between copyrights and patents.” Sony Corp. of Am. v. Universal City Studios, Inc.,

464 U.S. 417, 439 n.19 (1984).

Unlike patents and copyrights, “trademark . . . licensing relationships depend to a large

extent on control of the quality of the products or services sold by the licensee.” S. REP. NO.

100-505, at 5, reprinted in 1988 U.S.C.C.A.N. 3200, 3204; see also Dawn Donut Co. v. Hart’s

Food Stores, Inc., 267 F.2d 358, 367 (2d Cir. 1959) (noting that licensors who fail to exercise

control and supervision over the operations of their licensees run the risk that the public will be

unknowingly deceived). A trademark indicates the source of a good or service to the consumer

and implies that the good or service will be of a consistent quality. See Two Pesos, Inc. v. Taco

Cabana, Inc., 505 U.S. 763, 768 (1992); In re XMH, 647 F.3d 690, 695 (7th Cir. 2011).

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Trademark law requires that the owner of the trademark retain decision making authority over

quality; however, if a trademark owner-licensor breaks off its business relations with a licensee,

the licensor can no longer ensure the continued quality of the ex-licensee’s operation. See In re

XMH, 647 F.3d at 695, 697. Consequently, “a court may find that the trademark owner has

abandoned the trademark, in which case the owner would be estopped from asserting rights to

the trademark.” Barcamerica Int’l USA Trust v. Tyfield Imps., Inc., 289 F.3d 589, 596 (9th Cir.

2002).

Because of the need for licensors to maintain quality control of trademarks, Congress

expressly excluded trademarks from the protections of § 365(n). See S. REP. NO. 100-505, at 5,

reprinted in 1988 U.S.C.C.A.N. 3200, 3204. Thus, by holding in Sunbeam that an intellectual

property licensee retains its ability to use the debtor’s trademark after rejection of the license, the

Seventh Circuit essentially requires the debtor to maintain its obligation to monitor the licensee’s

use of its trademark or risk trademark abandonment. See James M. Wilton & Andrew G.

Devore, Trademark Licensing in the Shadow of Bankruptcy, 68 BUS. LAW. 739, 774 (2013).

Because “the authority to reject an executory contract is vital to the basic purpose to a Chapter

11 reorganization,” requiring such burdensome obligations undercuts the purpose of rejection

under § 365(a) and runs directly counter to the Code’s attempt “to give a debtor-in-possession

some flexibility and breathing space.” Bildisco, 465 U.S. at 528, 532; Lubrizol, 756 F.2d at

1048.

B. The Seventh Circuit erred by substituting its own unprecedented views of

trademark license protection over those prescribed by Congress.

In Sunbeam, the Seventh Circuit analogized the treatment of trademark licensees to that

of tenants under real estate leases under § 365(h), perhaps relying on Congress’s assertion that

§ 365(n) was meant to treat intellectual property licenses in the same general manner as real

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estate leases. See James M. Wilton & Andrew G. Devore, Trademark Licensing in the Shadow

of Bankruptcy, 68 BUS. LAW. 739, 763 (2013); S. REP. NO. 100-505, at 4, reprinted in 1988

U.S.C.C.A.N. 3200, 3203. In doing so, however, the court “failed to recognize that, in section

365(h), Congress explicitly granted non-debtor tenants favorable treatment in the event of

rejection of real estate leases, a favorable treatment that was denied to trademark licensees when

similar protections were granted to licensees of patents and copyrights under section 365(n).”

James M. Wilton & Andrew G. Devore, Trademark Licensing in the Shadow of Bankruptcy, 68

BUS. LAW. 739, 763 (2013). Congress’s statutory protections for non-debtor parties in the

aforementioned Code sections demonstrate Congress’s awareness of the adverse consequences

provided for by the rejection of executory contracts. See Lubrizol, 756 F.2d at 1048.

By affording trademark licensees the same special treatment as real estate lessees, the

Seventh Circuit subverted the intent of Congress and essentially rendered § 365(n) unnecessary.5

Under Sunbeam, trademark licensees “receive the same treatment under [§] 365(g) that statutory

intellectual property licensees receive under [§] 365(n).” John Thomas Ellwood, The Effects of

the Sunbeam Decision on the Rejection of Trademark Licenses in Bankruptcy, Seton Hall Law

eRepository, Student Scholarship, Paper 213, at 18 (2013). But if Congress had wanted to give

trademark licensees the same rights as real estate lessees, or licensees of other types of

intellectual property, it would have done so. Accordingly, this Court should find that Lubrizol,

not Sunbeam, controls the rejection of trademark licenses.

5 “It is a well settled principle of statutory construction that a court should interpret a statute ‘as to avoid rendering

superfluous’ any part of the [statute].” John Thomas Ellwood, The Effects of the Sunbeam Decision on the Rejection

of Trademark Licenses in Bankruptcy, Seton Hall Law eRepository, Student Scholarship, Paper 213, at 18 (2013)

(citing Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 112 (1991)).

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C. Under Lubrizol, Foodstar should be allowed to reject its Burger Bites trademark

licensing agreement with Vohra—holding otherwise would gravely undercut the

purpose of bankruptcy reorganization.

Under Lubrizol, § 365 requires evaluation of (1) whether the contract is executory, and

(2) “if so, whether its rejection would be advantageous to the bankrupt.” Lubrizol, 756 F.2d at

1045. As previously stated, the parties have stipulated that the trademark licensing agreement

between Foodstar and Vohra is an executory contract. (R. at 5.) Courts generally accept a

bankrupt debtor’s request to reject an executory contract unless “the decision of the debtor that

rejection will be advantageous is so manifestly unreasonable that it could not be based on sound

business judgment, but only on bad faith, or whim or caprice.” Lubrizol, 756 F.2d at 1047. In

Lubrizol, the bankruptcy court found that RMF’s principal asset was its metal coating process

and that the process represented RMF’s “primary potential source of funds by which [it] might

emerge from bankruptcy.” Id. There was also evidence that allowing Lubrizol to retain its rights

under the agreement would hinder RMF’s ability to achieve more favorable terms when it sold or

licensed the technology to other potential licensees. See id. Thus, the bankruptcy court found,

and the Fourth Circuit affirmed, that RMF’s decision to reject was based on sound business

judgment. See id.

Here, Foodstar exercised sound business judgment in rejecting the Vohra licensing

agreement. Foodstar’s primary asset is its Burger Bites trademark, which it plans to sell along

with an assignment of all of the Burger Bites restaurant franchise agreements for the restaurants

franchised by Foodstar. (R. at 4.) Thus, similar to Lubrizol, the sale of the Burger Bites

trademark represents “the primary potential source of funds by which [Foodstar] might emerge

from bankruptcy.” Lubrizol, 756 F.2d at 1047. The bankruptcy judge had undisputed evidence

in front of him that the worldwide Burger Bites trademark would sell for 10 to 15 percent less if

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it was subject to the Vohra license. (R. at 5.) Appropriately, the bankruptcy judge found that

Foodstar’s decision to reject the Vohra agreement was in the best interest of the estate. (R. at 5.)

Vohra asserts that rejection is not in the best interest of the estate because it would simply

deprive the estate of the benefits of the license without terminating his right to use the trademark.

(R. at 5.) To the contrary, under Lubrizol, Foodstar’s rejection does in fact terminate Vohra’s

right to use the Burger Bites trademark. See Lubrizol, 756 F.2d at 1048. In addition, because the

licensing agreement gives Foodstar control over quality, and because trademark licensing

relationships depend on quality control, rejection of the agreement relieves Foodstar (and its

successor) of the burdensome obligation to maintain quality control over the trademark in the

thirty-two separate Burger Bites restaurant locations in Eastlandia. See S. REP. NO. 100-505, at

5, reprinted in 1988 U.S.C.C.A.N. 3200, 3204; (R. at 4.) Such a burden would undoubtedly be

against the best interest of the estate and would likely require a significant expenditure of

resources, thus undercutting the Code’s effort to “assist financially distressed business

enterprises by providing them with breathing space in which to return to a viable state.” C-TC

9th Ave. P’ship v. Norton Co. (In re C-TC 9th Ave. P’ship), 113 F.3d 1304, 1310 (2d Cir. 1997).

Accordingly, because Foodstar’s rejection of the Vohra license agreement is in the best interest

of the estate, Foodstar has met the business judgment standard with respect to its decision to

reject the agreement. See Lubrizol, 756 F.2d at 1045. Vohra, therefore, only has a claim for

money damages under § 365(g). See id. at 1048.

Because the statutory language and history of § 365(n) strongly support Lubrizol’s

interpretation of § 365 that rejection of the Vohra trademark licensing agreement terminates

Vohra’s ability to use Foodstar’s trademark, this Court should adopt the Fourth Circuit’s rule and

reverse the judgment of the Thirteenth Circuit Court of Appeals.

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II. The presumption against extraterritoriality does not prevent the application of

§ 365 to the Vohra trademark licensing agreement because significant authority

demonstrates international application of the Code in full.

Congress has the unquestioned authority to apply its laws extraterritorially. See Hong

Kong & Shanghai Banking Corp., Ltd. v. Simon (In re Simon), 153 F.3d 991, 995 (9th Cir. 1998).

Traditionally, this Court analyzed the extraterritoriality of a statute using a three-pronged

approach, including examination of the statute’s language, legislative history, and any

administrative interpretations. See Suzanne Harrison, The Extraterritoriality of the Bankruptcy

Code: Will the Borders Contain the Code?, 12 BANKR. DEV. J. 809, 816–17 (1996) (citing Foley

Bros., Inc. v. Filardo, 336 U.S. 281, 285–88 (1949)). In EEOC v. Arabian American Oil Co.,

this Court concluded that there is a presumption “that legislation of Congress, unless a contrary

intent appears, is meant to apply only within the territorial jurisdiction of the United States.” 499

U.S. 244, 248 (1991) (Aramco). Although Justice Marshall’s dissent in Aramco interpreted the

majority opinion as setting forth a “clear statement” rule, this Court has since made clear “that

reference to nontextual sources is permissible.” Id. at 261 (Marshall, J., dissenting); Kollias v.

D & G Marine Maint., 29 F.3d 67, 73 (2d Cir. 1994).

For example, in Smith v. United States, this Court looked at the language, structure, and

legislative history of the Federal Tort Claims Act for “clear evidence of congressional intent” to

apply the Act extraterritorially. 507 U.S. 197, 203–04 (1993). Subsequently, in Sale v. Haitian

Centers Council, Inc., this Court examined “all available evidence” in search of any indication

that Congress intended for § 243(h) of the Immigration and Nationality Act to apply

extraterritorially, including its legislative history. 509 U.S. 155, 176–77 (1993); see also

Morrison v. Nat’l Austl. Bank Ltd., 130 S. Ct. 2869, 2891 (2010) (Stevens, J., concurring)

(observing that cases both before and after Aramco clearly indicate that this Court has continued

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to give effect to all available evidence when considering a statute’s extraterritorial application).

Most recently, this Court held that the presumption against extraterritoriality requires a clear

indication of extraterritorial application, yet the Court has continued its reliance on previously

utilized tools of statutory construction such as a statute’s text, legislative history, purpose, and

even its context. See Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 1665–69 (2013);

Morrison, 130 S. Ct. at 2878, 2883. Therefore, it is crucial to look to these sources to determine

whether the Code applies extraterritorially.

A. The presumption against extraterritoriality applies in all cases; thus, the Code is

subject to the presumption.

Courts often begin their analysis of the applicability of the presumption against

extraterritoriality by considering whether it applies at all with respect to the statute at issue. See

Kollias, 29 F.3d at 70. In Maxwell Commc’n Corp. plc v. Barclays Bank (In re Maxwell

Commc’n Corp. plc), Judge Brozman found that the facts of a particular case must have “a center

of gravity outside the United States” to have an extraterritorial application of the law. 170 B.R.

800, 809 (Bankr. S.D.N.Y. 1994). In Morrison, however, this Court explained that judges must

“apply the presumption in all cases, preserving a stable background against which Congress can

legislate with predictable effects.” Morrison, 130 S. Ct. at 2881 (emphasis added); see also

Kiobel, 133 S. Ct. at 1664 (applying the presumption even where the statute at issue was “strictly

jurisdictional”). Consequently, the Code is subject to the presumption against extraterritoriality.

B. The Code’s integrated scheme strongly illustrates congressional intent to apply the

Code internationally.

This Court has not indicated whether courts should evaluate an act as a whole or each

section in isolation to determine Congress’s extraterritorial intent. See Suzanne Harrison, The

Extraterritoriality of the Bankruptcy Code: Will the Borders Contain the Code?, 12 BANKR.

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DEV. J. 809, 830–31 (1996). Nonetheless, in Aramco, this Court evaluated Title VII as a whole

to determine Congress’s extraterritorial intent. See id. at 831 (citing Aramco, 499 U.S. at 249–

56). Thus, contrary to the Thirteenth Circuit’s opinion that courts should evaluate each section

independently, this Court should evaluate the Code as a whole. (R. at 23); see also Groupe v.

Hill (In re Hill), 156 B.R. 998, 1006 (Bankr. N.D. Ill. 1993) (“[T]he Bankruptcy Code must be

considered as a whole and the impact and application of one section cannot be viewed in

isolation without proper thought to other relevant and perhaps controlling sections.”).

“The bankruptcy laws provide an integrated scheme for gathering and disbursing the

assets of a debtor's estate,” and the Code “anticipates that this will take place within a single

proceeding, rather than asset by asset in inefficient piecemeal litigation.” French v. Liebmann

(In re French), 440 F.3d 145, 154 (4th Cir. 2006) (Wilkinson, J., concurring) (citing Grady v.

A.H. Robins Co., 839 F.2d 198, 202 (4th Cir. 1988)). To be sure, a major purpose of the Code is

to prevent the probable chaos created by uncoordinated proceedings in different courts as

creditors race to gain access to the debtor’s assets. See Underwood v. Hilliard (In re Rimsat,

Ltd.), 98 F.3d 956, 961 (7th Cir. 1996). Accordingly, numerous Code sections reflect

congressional support for the Code’s extraterritorial application. See In re French, 440 F.3d at

155 (Wilkinson, J., concurring).

1. Congress’s broad definition of property of the estate in § 541 includes property

located both inside and outside the territorial boundaries of the United States.

There is clear congressional intent to apply the Code beyond the territorial boundaries of

the United States. See In re Simon, 153 F.3d at 996. Under § 541(a), the filing of a bankruptcy

petition under §§ 301, 302, or 303 creates a bankruptcy estate. See 11 U.S.C. § 541(a). The

bankruptcy estate includes all property “wherever located and by whomever held.” Id.

(emphasis added). In addition, § 1334(e)(1) provides that the district court in which the

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bankruptcy case “is commenced . . . shall have exclusive jurisdiction of all the property,

wherever located, of the debtor . . . and of property of the estate.” 28 U.S.C. § 1334(e)(1)

(emphasis added); see also In re Simon, 153 F.3d at 996 (discussing how a district court obtains

exclusive in rem jurisdiction over all property of the estate). Thus, the “court’s exercise of

custody over the debtor’s property, via its exercise of in rem jurisdiction, essentially creates a

fiction that the property—regardless of actual location—is legally within the jurisdictional

boundaries of the district court in which it sits.” In re Simon, 153 F.3d at 996 (internal citations

omitted).

To be sure, this Court has found that bankruptcy courts have jurisdiction over property

within their actual or constructive possession. See Katchen v. Landy, 382 U.S. 323, 327 (1966).

Hence, property of the estate includes property within the bankruptcy court’s constructive

possession, even property outside the territorial jurisdiction of the United States. See id.; In re

Simon, 153 F.3d at 996. Accordingly, Congress’s use of the words “wherever located” indicate

its intent to apply the Code extraterritorially with regard to property of the estate. See In re

Simon, 153 F.3d at 996; David M. Green & Walter Benzija, Spanning the Globe: The Intended

Extraterritorial Reach of the Bankruptcy Code, 10 AM. BANKR. INST. L. REV. 85, 86–87 (2002)

(“Through its broad and borderless definition of what constitutes property of the estate, Congress

intended to enable the bankruptcy courts to safeguard interests of a debtor’s estate regardless of

their physical location.”).

While “generic terms like ‘any’ or ‘every’ do not rebut the presumption against

extraterritoriality,” the statutory language “wherever located” suggests that Congress intended

the Code to have extraterritorial reach. Kiobel, 133 S. Ct. at 1665. Indeed, in Aramco, this Court

noted Congress’s awareness of the need to make a clear statement that a statute has

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extraterritorial application. See Aramco, 499 U.S. at 258. As one example of such awareness,

this Court cited the Logan Act, which applies to “[a]ny citizen . . . wherever he may be.” Id.

(citing the Logan Act, 18 U.S.C. § 953) (emphasis added). This Court has found that “intent

may be discerned with reference to similarly phrased legislation.” In re Simon, 153 F.3d at 995

(citing Aramco, 499 U.S. at 250–51). Surely then, if the words “wherever he may be” constitute

a clear statement of congressional intent in the Logan Act, the fact that Congress defined

property of the estate to include property “wherever located” in the Code is affirmative evidence

of Congress’s intended extraterritorial application of the Code. See Aramco, 499 U.S. at 258; 11

U.S.C. § 541(a).

The plain language of § 541, when read in isolation and in conjunction with § 1334(e)(1)

of the Code, indicates that Congress intended the Code to reach property located both inside and

outside the territorial boundaries of the United States. The legislative history of § 541 further

supports this conclusion.

2. The legislative history of § 541 provides striking support for its extraterritorial

application.

In 1952, Congress amended § 70a of the Bankruptcy Act to make it clear that Congress

intended § 70a to apply extraterritorially. See Thurmond v. Rajapakse (In re Rajapakse), 346

B.R. 233, 236 (Bankr. N.D. Ga. 2005). The amended § 70a read in relevant part as follows:

The trustee of the estate of a bankrupt . . . shall . . . be vested by operation of law

with the title of the bankrupt as of the date of the filing of the petition initiating a

proceeding under this Act, except insofar as it is to property which is held to be

exempt, to all of the following kinds of property wherever located . . . (5)

property . . . which prior to the filing of the petition he [the bankrupt] could by

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any means have transferred or which might have been levied upon and sold under

judicial process against him, or otherwise seized . . . .

Id. (quoting 11 U.S.C. § 70a (repealed 1978)). The House Report accompanying the bill

resolved any ambiguity as to the extraterritorial effect of § 70a. See id. The Report provides that

Congress amended § 70a “to make clear that a trustee in bankruptcy is vested with the title of the

bankrupt in property which is located without, as well as within, the United States.” H.R. REP.

NO. 82-2320 (1952), reprinted in 1952 U.S.C.C.A.N. 1960, 1976; see also 4A Collier on

Bankruptcy ¶ 70.03 (14th ed. 1978).

When the Bankruptcy Code became effective in 1979, Congress repealed § 70a; however,

the legislative history of § 541 states that it includes the property described in § 70a. See H.R.

REP. NO. 95-595, at 367, reprinted in 1978 U.S.C.C.A.N. 5963, 6323. Specifically, the

legislative history states that the scope of § 541(a)(1) is broad, and that “[i]t includes all kinds of

property, including tangible or intangible property, causes of action (see Bankruptcy Act § 70a

(6)), and all other forms of property currently specified in section 70a of the Bankruptcy Act

§ 70a . . . .” H.R. REP. NO. 95-595, at 367, reprinted in 1978 U.S.C.C.A.N. 5963, 6323. If, as

this Court has stated, Congress says what it means and means what it says, there is no reason to

doubt Congress’s continued intent to include foreign property in the estate. See Barnhart, 534

U.S. at 461–62. Moreover, this Court has often said that “absent a textual footing, [it] will not

presume a departure from longstanding pre-Code practice.” Dewsnup, 502 U.S. at 433 (Scalia,

J., dissenting). Here, Congress has provided no such textual footing worthy of departure from

pre-Code practice. See id. Congress granted broad jurisdiction to permit bankruptcy courts to

“deal efficiently and expeditiously with all matters connected with the bankruptcy estate.”

Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995). Accordingly, as defined in § 541, property

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of the estate includes property of the debtor located outside of the United States. See In re

Rajapakse, 346 B.R. at 236; In re Nat’l Safe Ctr., Inc., 41 B.R. 195, 196 (Bankr. D. Haw. 1984)

(holding that the debtor’s estate was comprised of property both within and without the United

States). Thus, both the plain language and legislative history of § 541 support this conclusion.

3. Congress intended for the automatic stay to apply extraterritorially, as evidenced by

the broad statutory language of §§ 541 and 1334(e)(1).

Several courts have looked to the broad language of §§ 541 and 1334(e)(1) in concluding

that § 362 applies extraterritorially. See, e.g., Nakash v. Zur (In re Nakash), 190 B.R. 763, 768

(Bankr. S.D.N.Y. 1996). In In re Nakash, a debtor filed a voluntary petition for reorganization

under Chapter 11 of the Code. See id. at 766. Subsequently, a foreign receiver filed a second

involuntary proceeding against the debtor in Israel. See id. In connection with the debtor’s

Chapter 11 filing, the court granted an automatic stay. See id. at 767. In evaluating whether the

receiver’s actions were a violation of the automatic stay, then Chief Judge Lifland found that

Congress intended the automatic stay of § 362 to apply extraterritorially. See id. at 768.

Chief Judge Lifland determined that the broad language of §§ 541 and 1334(e)(1), the

applicability of the automatic stay to all entities, and the legislative history of § 541 supported

his conclusion that the automatic stay applies extraterritorially. See id. The court emphasized

that the stay “exists to protect the estate from a chaotic and uncontrolled scramble for the

[d]ebtor’s assets” and “serves to protect and preserve the jurisdiction of the bankruptcy court so

that the court can administer the debtor’s estate in an orderly fashion.” Id. (internal citations

omitted). Accordingly, the interaction between §§ 541, 1334(e)(1), and 362 demonstrates how

the entire Code can be utilized to support an extraterritorial application. See Suzanne Harrison,

The Extraterritoriality of the Bankruptcy Code: Will the Borders Contain the Code?, 12 BANKR.

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DEV. J. 809, 835 (1996). Similar to the automatic stay, §§ 541 and 1334(e)(1) support an

extraterritorial application of § 365.

4. In light of the purpose of § 365 and Chapter 11 reorganizations, the language of

§§ 541 and 1334(e)(1) necessitate the extraterritorial application of § 365.

In Kiobel, this Court held that the presumption against extraterritoriality can be overcome

“where the claims touch and concern the territory of the United States . . . with sufficient force.”

Kiobel, 133 S. Ct. at 1669. Notably, however, this Court did not define what constitutes

sufficient force. See id. Nevertheless, § 365 is such “an integral facet of the bankrupt’s ability to

restructure its business operations into an economically viable format,” that its provisions and

protections necessarily touch and concern the United States. Raymond T. Nimmer, Executory

Contracts in Bankruptcy: Protecting the Fundamental Terms of the Bargain, 54 U. COLO. L.

REV. 507, 513 (1983); Kiobel, 133 S. Ct. at 1669.

Although the language and legislative history of § 365 do not affirmatively indicate that

Congress intended to apply § 365 extraterritorially, congressional intent can be inferred from the

central purpose of § 365 and Chapter 11 reorganizations in general. See 11 U.S.C. § 365; H.R.

REP. NO. 95-595, at 347, reprinted in 1978 U.S.C.C.A.N. 5963, 6303–04. Congress enacted

Chapter 11 to allow a financially distressed entity to reorganize. See NMSBPCSLDHB, L.P. v.

Integrated Telecom Express, Inc. (In re Integrated Telecom Express, Inc.), 384 F.3d 108, 121 (3d

Cir. 2004). Essential to the basic purpose of Chapter 11 reorganization is the debtor’s ability to

reject executory contracts, thus releasing the debtor’s estate from burdensome obligations and

impediments to a successful reorganization. See Bildisco, 465 U.S. at 528. A debtor may retain

valuable or profitable contracts and reject unnecessary, costly, or damaging ones. See Peter M.

Gilhuly, Kimberly A. Posin, Ted A. Dillman, Intellectually Bankrupt?: The Comprehensive

Guide to Navigating IP Issues in Chapter 11, 21 AM. BANKR. INST. L. REV. 1, 34 (2013) (“The

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ability to reject executory contracts is one of the most powerful rights afforded to a debtor in

bankruptcy and generally aids greatly in the debtor’s successful reorganization.”).

Denying extraterritorial application to § 365 undermines this purpose. Notably,

bankruptcy law characterizes a trademark as a valuable property right. See Richard Lieb, The

Interrelationship of Trademark Law and Bankruptcy Law, 64 AM. BANKR. L.J. 1, 6 (1990).

Consequently, “a trademark owned by a title 11 debtor constitutes ‘property of the estate’ within

the meaning of section 541 of the Bankruptcy Code.” Id. Thus, because property of the estate

includes all property “wherever located and by whomever held,” the bankruptcy court has

constructive possession of the trademark, and presumably any trademark licensing agreements,

outside the territorial boundaries of the United States. 11 U.S.C. § 541(a); In re Simon, 153 F.3d

at 996. Given that § 365 is vital to the debtor’s ability to “restructure its business operations into

an economically viable format,” it is essential that a court’s ability to grant rejection extends

beyond the territorial boundaries of the United States. Raymond T. Nimmer, Executory

Contracts in Bankruptcy: Protecting the Fundamental Terms of the Bargain, 54 U. COLO. L.

REV. 507, 513 (1983).

If § 365 does not apply extraterritorially, Vohra will benefit significantly from his use of

the trademark at the expense of Foodstar and its successor, who still have the burdensome

obligation to maintain quality controls over the trademark abroad, or risk abandonment of the

trademark. See Barcamerica, 289 F.3d at 595–96. In addition, Foodstar will be at a severe

disadvantage because its trademark will sell for 10 to 15 percent less if it is subject to Vohra’s

license. (R. at 5.) Surely Congress did not intend to disadvantage licensors like Foodstar simply

because their licensees are outside the territorial boundaries of the United States. See Suzanne

Harrison, The Extraterritoriality of the Bankruptcy Code: Will the Borders Contain the Code?,

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12 BANKR. DEV. J. 809, 834 (1996). As a result, this Court should find that the presumption

against extraterritoriality does not prevent § 365 from applying to the Vohra licensing agreement.

5. Other provisions of the Code affirm the notion that Congress intended for the Code

to have extraterritorial effect.

Because the Code has “numerous references to foreign entities and proceedings,” there is

evidence of Congressional intent to apply the Code extraterritorially. David M. Green & Walter

Benzija, Spanning the Globe: The Intended Extraterritorial Reach of the Bankruptcy Code, 10

AM. BANKR. INST. L. REV. 85, 93 (2002). Notably, in Aramco, this Court found that “Title VII

consistently [spoke] in terms of ‘States’ and state proceedings, and [that it failed] to mention

foreign nations or foreign proceedings.” Aramco, 499 U.S. at 256.

Former § 304 is perhaps “the most straightforward example of the Code’s recognition

that it must be responsive to international realities.” David M. Green & Walter Benzija,

Spanning the Globe: The Intended Extraterritorial Reach of the Bankruptcy Code, 10 AM.

BANKR. INST. L. REV. 85, 94 (2002). Section 304, which applied to the entirety of Chapter 11,

allowed a foreign debtor to commence an ancillary proceeding in the United States. See id.; In

re Axona Int’l Credit & Commerce Ltd., 88 B.R. 597, 606 (Bankr. S.D.N.Y. 1998). Although

§ 304 was repealed, the legislative history of Chapter 15 indicates that “access to the

jurisprudence which developed under section 304 is preserved in the context of new section

1507.” H.R. REP. NO. 109-31, at 109, 119 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 172, 181

(“This section is intended to permit the further development of international cooperation under

section 304 . . . .”). Hence, Chapter 15’s substantive rules are not considerably different from

those in former § 304. See Evelyn H. Biery, Jason L. Boland, & John D. Cornwell, A Look at

Transnational Insolvencies and Chapter 15 of the Bankruptcy Abuse Prevention and Consumer

Protection Act of 2005, 47 B.C. L. REV. 23, 51 (2005).

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Moreover, pursuant to § 109(a), “only a person that resides or has a domicile, a place of

business, or property in the United States, or a municipality, may be a debtor under [Title 11].”

11 U.S.C. § 109(a). Accordingly, § 109 allows a foreign person to be a debtor under Chapter 11.

See Suzanne Harrison, The Extraterritoriality of the Bankruptcy Code: Will the Borders Contain

the Code?, 12 BANKR. DEV. J. 809, 837 (1996). As such, foreign debtors can benefit from the

“arsenal of weapons provided under the Code.” In re Maxwell Commc’n Corp. plc, 170 B.R. at

812. Thus, contrary to Title VII, the Code does in fact contain specific references to foreign

entities and proceedings, implying that its focus is not entirely domestic. See David M. Green &

Walter Benzija, Spanning the Globe: The Intended Extraterritorial Reach of the Bankruptcy

Code, 10 AM. BANKR. INST. L. REV. 85, 94–95 (2002).

C. Because the Vohra licensing agreement falls within the Court’s constructive

possession, the application of § 365 is not extraterritorial.

Application of the Code to property in the court’s constructive possession, and therefore,

in the United States, is not an extraterritorial application of the Code at all. See Katchen, 382

U.S. at 327; In re Simon, 153 F.3d at 996. In In re Rimsat, Ltd., the Seventh Circuit faced “the

issue of whether . . . civil contempt sanctions imposed on [the receiver] for violation of the

automatic stay was an impermissible extraterritorial application of the stay.” David M. Green &

Walter Benzija, Spanning the Globe: The Intended Extraterritorial Reach of the Bankruptcy

Code, 10 AM. BANKR. INST. L. REV. 85, 103 (2002) (citing In re Rimsat, Ltd., 98 F.3d at 961).

Chief Justice Posner avoided the presumption against extraterritoriality by relying on the court’s

ability to forbid a United States citizen from “conduct[ing] proceedings anywhere in the world

that would affect the debtor’s property.” In re Rimsat, Ltd., 98 F.3d at 961. Moreover, Chief

Justice Posner found that there was “no authority for allowing the presumption against the

extraterritorial application of U.S. statutes . . . to defeat application of the automatic stay to a

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U.S. citizen to prevent his interfering with a U.S. bankruptcy proceeding in which the debtor is a

corporation headquartered in the United States.” Id. Noting its need to protect the efficacy of

the bankruptcy proceedings, and its power under § 541(a) to control and marshal the debtor’s

assets, the Rimsat court essentially held that application of the automatic stay was not

extraterritorial. See id.; T. Brandon Welch, The Territorial Avoidance Power of the Bankruptcy

Code, 24 EMORY BANKR. DEV. J. 553, 561 n.62 (2008).

Similarly, applying § 365 to the Vohra licensing agreement would not constitute an

extraterritorial application of the statute. Because trademarks and trademark licensing

agreements constitute property of the estate within the meaning of § 541, the agreement with

Vohra is within the Court’s jurisdictional boundaries under § 1334(e)(1), and thus, within its

control. See In re Simon, 153 F.3d at 996; Richard Lieb, The Interrelationship of Trademark

Law and Bankruptcy Law, 64 AM. BANKR. L.J. 1, 6 (1990). Accordingly, applying the rejection

powers of § 365 to the Vohra licensing agreement and terminating Vohra’s ability to use

Foodstar’s Burger Bites trademark, is not an extraterritorial application of § 365. Rather,

application of § 365 to Vohra’s licensing agreement is simply an exercise of the broad

jurisdiction granted by Congress to courts so that they may “deal efficiently and expeditiously

with all matters connected with the bankruptcy estate.” Celotex, 514 U.S. at 308. Consequently,

although the purpose of § 365 supports its extraterritorial application, even if this Court

disagrees, it can nevertheless apply § 365 to the Vohra licensing agreement.

D. Eastlandian law should not apply in this case; rather, the Code should control due

to considerations of comity.

The Thirteenth Circuit argued that standard choice of law principles point to the

application of Eastlandian law. (R. at 13.) In Hartford Fire Insurance Co. v. California, Justice

Scalia explained that lower courts have “tempered the extraterritorial application of [statutes]

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with considerations of ‘international comity.’” 509 U.S. 764, 817 (1993). A comity analysis,

however, is only necessary where there is an actual conflict between domestic and foreign law.

See id. at 798 (citing Société Nationale Industrielle Aérospatiale v. United States Dist. Court for

Southern Dist. of Iowa, 482 U.S. 522, 555 (1987)). Moreover, this Court has held that comity

should not operate such that “any nation will suffer the laws of another to interfere with her own

to the injury of her citizens.” Hilton v. Guyot, 159 U.S. 113, 164 (1895). Here, both United

States and Eastlandian law permit rejection of trademark licenses; however, Eastlandian law

does not terminate the licensee’s rights to use the trademark upon rejection, whereas United

States law does under § 365 of the Code. See Lubrizol, 756 F.2d at 1048; (R. at 5.)

Nevertheless, “[d]espite the strong mandate for comity and cooperation provided by both the

[UNCITRAL] Model Law and [C]hapter 15,” this Court should hold that the fundamental policy

of the Bankruptcy Code requires application of § 365 abroad. Daniel A. Nolan, Comment, A

“Fundamental” Problem: The Vulnerability of Intellectual Property Licenses in Chapter 15 and

the Meaning of § 1506, 28 EMORY BANKR. DEV. J. 177, 180 (2011).

Several provisions of the Code are absolutely crucial to the United States bankruptcy

system, including the broad grant of jurisdiction in §§ 541 and 1334(e)(1). See id. at 207–08

(citing In re Gold & Honey, Ltd., 410 B.R. 357 (Bankr. E.D.N.Y. 2009)). Indeed, prohibiting

United States courts from exercising jurisdiction over a debtor’s property for reasons of comity

would inhibit the successful administration of the debtor’s bankruptcy case. See id. at 208. The

automatic stay of § 362 is yet another fundamental component of bankruptcy, providing the

debtor with “a breathing spell from litigation and collection activities.” In re Gold & Honey,

Ltd., 410 B.R. at 368–69, 371.

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Similarly, a debtor’s ability to reject trademark licenses under § 365 is fundamental to the

“[e]ase and centrality of [bankruptcy] administration.” In re French, 440 F.3d at 155

(Wilkinson, J., concurring). In purely domestic cases, courts recognize the importance of the

debtor’s ability to reject trademark licenses. See, e.g., Lubrizol, 756 F.2d at 1048. Failing to

apply § 365 abroad, however, leaves a trademark licensor like Foodstar with uncertainty about

which country’s laws govern its bankruptcy case. See Daniel A. Nolan, Comment, A

“Fundamental” Problem: The Vulnerability of Intellectual Property Licenses in Chapter 15 and

the Meaning of § 1506, 28 EMORY BANKR. DEV. J. 177, 222 (2011). Here, applying Eastlandian

law would allow Vohra to continue his use of the Burger Bites trademark after Foodstar’s

rejection of the contract. (R. at 5.) Such a result would subvert the basic purpose of

rejection—“to release the debtor’s estate from burdensome obligations that can impede a

successful reorganization.” Bildisco, 465 U.S. at 528.

To be sure, courts have applied § 365, specifically § 365(n), extraterritorially to promote

fundamental United States policies. See Jaffé v. Samsung Elecs. Co., Ltd., No. 12-1802, at *42

(4th Cir. Dec. 3, 2013); In re Qimonda AG, 462 B.R. 165, 178–83 (Bankr. E.D. Va. 2011).

Contrary to the Thirteenth Circuit’s opinion, the Jaffé court did not refuse to give extraterritorial

effect to contrary German principles so much as it applied § 365(n) extraterritorially to a German

insolvency proceeding under Chapter 15. (R. at 14.) In Jaffé, the Fourth Circuit noted that

§ 1506 “authorizes a bankruptcy court to refuse to take an action that would be manifestly

contrary to U.S. public policy.” Jaffé, No. 12-1802, at *42 (citing 11 U.S.C. § 1506).

Accordingly, the court found that the special protections of § 365(n) should apply abroad so as to

allow a patent licensee to continue using the licensor’s patents, in contrast with German

insolvency law. See id. at *6, *42. Although Congress did not extend the special protections of

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§ 365(n) to trademark licenses, if the fundamental policies of protecting copyrights and patents

under § 365(n) can be applied extraterritorially, then surely the fundamental policy of rejection

under § 365 should apply extraterritorially as well. See 11 U.S.C. §§ 101(35A), 365(n).

Application of Eastlandian law to the Vohra licensing agreement would injure Foodstar’s

reorganization; therefore, considerations of comity should not apply in this case. See Hilton, 159

U.S. at 164. Thus, this Court should hold that the fundamental purposes of the Code are best

served by application of the § 365 power of rejection abroad.

Because the broad language and legislative history of § 541 strongly support an

extraterritorial application of the entire Code, and because this Court can apply § 365 to the

Vohra licensing agreement without applying it extraterritorially, this Court should reverse the

judgment of the Thirteenth Circuit and hold that the presumption against extraterritoriality does

not prevent the application of § 365 to a foreign licensing agreement.

CONCLUSION

For the foregoing reasons, Petitioner Foodstar, Inc. respectfully requests that this Court

reverse the judgment of the Thirteenth Circuit Court of Appeals and hold that (1) rejection of a

trademark license in bankruptcy terminates the licensee’s right to use the debtor’s trademark; and

(2) the presumption against extraterritoriality does not prevent the application of § 365 to a

foreign licensing agreement because the entire Code can be applied extraterritorially.

Respectfully Submitted,

TEAM P21

COUNSEL FOR PETITIONER

Team P21

I

APPENDIX A

11 U.S.C. § 101(35A). Definitions.

(35A) The term “intellectual property” means—

(A) trade secret;

(B) invention, process, design, or plant protected under title 35;

(C) patent application;

(D) plant variety;

(E) work of authorship protected under title 17; or

(F) mask work protected under chapter 9 of title 17;

to the extent protected by applicable nonbankruptcy law.

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II

APPENDIX B

11 U.S.C. § 365. Executory contracts and unexpired leases.

(a) Except as provided in sections 765 and 766 of this title and in subsections (b), (c), and (d) of

this section, the trustee, subject to the court's approval, may assume or reject any executory

contract or unexpired lease of the debtor.

. . . .

(g) Except as provided in subsections (h)(2) and (i)(2) of this section, the rejection of an

executory contract or unexpired lease of the debtor constitutes a breach of such contract or

lease—

(1) if such contract or lease has not been assumed under this section or under a plan

confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the date of the

filing of the petition; or

(2) if such contract or lease has been assumed under this section or under a plan

confirmed under chapter 9, 11, 12, or 13 of this title—

(A) if before such rejection the case has not been converted under section 1112,

1208, or 1307 of this title, at the time of such rejection; or

(B) if before such rejection the case has been converted under section 1112, 1208,

or 1307 of this title—

(i) immediately before the date of such conversion, if such contract or

lease was assumed before such conversion; or

(ii) at the time of such rejection, if such contract or lease was assumed

after such conversion.

(h) (1)(A) If the trustee rejects an unexpired lease of real property under which the debtor is

the lessor and—

(i) if the rejection by the trustee amounts to such a breach as would entitle

the lessee to treat such lease as terminated by virtue of its terms,

applicable nonbankruptcy law, or any agreement made by the lessee, then

the lessee under such lease may treat such lease as terminated by the

rejection; or

(ii) if the term of such lease has commenced, the lessee may retain its

rights under such lease (including rights such as those relating to the

amount and timing of payment of rent and other amounts payable by the

lessee and any right of use, possession, quiet enjoyment, subletting,

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III

assignment, or hypothecation) that are in or appurtenant to the real

property for the balance of the term of such lease and for any renewal or

extension of such rights to the extent that such rights are enforceable under

applicable nonbankruptcy law.

(B) If the lessee retains its rights under subparagraph (A)(ii), the lessee may offset

against the rent reserved under such lease for the balance of the term after the date

of the rejection of such lease and for the term of any renewal or extension of such

lease, the value of any damage caused by the nonperformance after the date of

such rejection, of any obligation of the debtor under such lease, but the lessee

shall not have any other right against the estate or the debtor on account of any

damage occurring after such date caused by such nonperformance.

(C) The rejection of a lease of real property in a shopping center with respect to

which the lessee elects to retain its rights under subparagraph (A)(ii) does not

affect the enforceability under applicable nonbankruptcy law of any provision in

the lease pertaining to radius, location, use, exclusivity, or tenant mix or balance.

(D) In this paragraph, “lessee” includes any successor, assign, or mortgagee

permitted under the terms of such lease.

(2)(A) If the trustee rejects a timeshare interest under a timeshare plan under which the

debtor is the timeshare interest seller and—

(i) if the rejection amounts to such a breach as would entitle the timeshare

interest purchaser to treat the timeshare plan as terminated under its terms,

applicable nonbankruptcy law, or any agreement made by timeshare

interest purchaser, the timeshare interest purchaser under the timeshare

plan may treat the timeshare plan as terminated by such rejection; or

(ii) if the term of such timeshare interest has commenced, then the

timeshare interest purchaser may retain its rights in such timeshare interest

for the balance of such term and for any term of renewal or extension of

such timeshare interest to the extent that such rights are enforceable under

applicable nonbankruptcy law.

(B) If the timeshare interest purchaser retains its rights under subparagraph (A),

such timeshare interest purchaser may offset against the moneys due for such

timeshare interest for the balance of the term after the date of the rejection of such

timeshare interest, and the term of any renewal or extension of such timeshare

interest, the value of any damage caused by the nonperformance after the date of

such rejection, of any obligation of the debtor under such timeshare plan, but the

timeshare interest purchaser shall not have any right against the estate or the

debtor on account of any damage occurring after such date caused by such

nonperformance.

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(i) (1) If the trustee rejects an executory contract of the debtor for the sale of real property or

for the sale of a timeshare interest under a timeshare plan, under which the purchaser is in

possession, such purchaser may treat such contract as terminated, or, in the alternative,

may remain in possession of such real property or timeshare interest.

(2) If such purchaser remains in possession—

(A) such purchaser shall continue to make all payments due under such contract,

but may,1 offset against such payments any damages occurring after the date of

the rejection of such contract caused by the nonperformance of any obligation of

the debtor after such date, but such purchaser does not have any rights against the

estate on account of any damages arising after such date from such rejection,

other than such offset; and

(B) the trustee shall deliver title to such purchaser in accordance with the

provisions of such contract, but is relieved of all other obligations to perform

under such contract.

(j) A purchaser that treats an executory contract as terminated under subsection (i) of this

section, or a party whose executory contract to purchase real property from the debtor is rejected

and under which such party is not in possession, has a lien on the interest of the debtor in such

property for the recovery of any portion of the purchase price that such purchaser or party has

paid.

. . . .

(n) (1) If the trustee rejects an executory contract under which the debtor is a licensor of a

right to intellectual property, the licensee under such contract may elect—

(A) to treat such contract as terminated by such rejection if such rejection by the

trustee amounts to such a breach as would entitle the licensee to treat such

contract as terminated by virtue of its own terms, applicable nonbankruptcy law,

or an agreement made by the licensee with another entity; or

(B) to retain its rights (including a right to enforce any exclusivity provision of

such contract, but excluding any other right under applicable nonbankruptcy law

to specific performance of such contract) under such contract and under any

agreement supplementary to such contract, to such intellectual property (including

any embodiment of such intellectual property to the extent protected by applicable

nonbankruptcy law), as such rights existed immediately before the case

commenced, for—

(i) the duration of such contract; and

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(ii) any period for which such contract may be extended by the licensee as

of right under applicable nonbankruptcy law.

(2) If the licensee elects to retain its rights, as described in paragraph (1)(B) of this

subsection, under such contract—

(A) the trustee shall allow the licensee to exercise such rights;

(B) the licensee shall make all royalty payments due under such contract for the

duration of such contract and for any period described in paragraph (1)(B) of this

subsection for which the licensee extends such contract; and

(C) the licensee shall be deemed to waive—

(i) any right of setoff it may have with respect to such contract under this

title or applicable nonbankruptcy law; and

(ii) any claim allowable under section 503(b) of this title arising from the

performance of such contract.

(3) If the licensee elects to retain its rights, as described in paragraph (1)(B) of this

subsection, then on the written request of the licensee the trustee shall—

(A) to the extent provided in such contract, or any agreement supplementary to

such contract, provide to the licensee any intellectual property (including such

embodiment) held by the trustee; and

(B) not interfere with the rights of the licensee as provided in such contract, or

any agreement supplementary to such contract, to such intellectual property

(including such embodiment) including any right to obtain such intellectual

property (or such embodiment) from another entity.

(4) Unless and until the trustee rejects such contract, on the written request of the licensee

the trustee shall—

(A) to the extent provided in such contract or any agreement supplementary to

such contract—

(i) perform such contract; or

(ii) provide to the licensee such intellectual property (including any

embodiment of such intellectual property to the extent protected by

applicable nonbankruptcy law) held by the trustee; and

(B) not interfere with the rights of the licensee as provided in such contract, or

any agreement supplementary to such contract, to such intellectual property

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(including such embodiment), including any right to obtain such intellectual

property (or such embodiment) from another entity.

. . . .

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APPENDIX C

11 U.S.C. § 541(a). Property of the estate.

(a) The commencement of a case under section 301, 302, or 303 of this title creates an estate.

Such estate is comprised of all the following property, wherever located and by whomever held:

. . . .

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APPENDIX D

28 U.S.C. § 1334(e)(1). Bankruptcy cases and proceedings.

(e) The district court in which a case under title 11 is commenced or is pending shall have

exclusive jurisdiction—

(1) of all the property, wherever located, of the debtor as of the commencement of such

case, and of property of the estate; and

. . . .